Making tax mistakes is very common for any business owner. As a business owner, you have various other roles and responsibilities while juggling urgent business tasks to be done. All this keeps you occupied that you merely get time to sit with your accountant. Not spending time with your accountant would end up in making common tax mistakes.
Some pay too much tax while others end up paying too little and some even fail to make use of the tax allowance that they are entitled for. Some tax mistakes are minor which merely brings in the notice of the HMRC while other tax mistakes may lead to legal actions such as penalties, fines, threat to wind up the business.
Filing taxes can be scary. It is complex and time-consuming. On top of that, filing incorrect taxes leads to serious consequences. For peace of mind, it is best to get connected with tax return services in the UK who can help you with tax preparation and also give practical tax advice that would help avoid tax mistakes.
Following are the common tax mistakes made by business owners and ensure these mistakes shouldn’t be repeated in the future:
Not keeping proper records:
There are bundles of receipts- sorting and storing them sounds like a huge task. However, if your business is VAT registered, then it is very important for you to keep these records while filing taxes. If not, then it’s a common mistake you’re making as a business owner. You are probably handing out your hard earned money to the HMRC. So, whenever you’re handed out VAT receipt for your purchase, make sure to keep it in your file.
There are various apps on your phone that will help you to keep all your receipts at one place. You can click the photo of the VAT receipt through the app and keep them and your accountant will take it ahead from there. Simple isn’t it! If all this sounds overwhelming, seek help from tax return services in the UK.
Home expenses- claiming too much:
You probably would have been claiming your home expenses. This is great! Problem arises when you over claim those expenses resulting in paying more tax in capital gain tax when you want to sell your property. How does this happen? As the value of your home rises and on the part of your home that you convert into business, you lose generous tax relief.
As a cost-conscious business owner, you probably might be performing many roles at a time leaving you less time to focus on accounting and bookkeeping. There are many companies in the UK offering accounting services to help you save time and maximise profits.
Making deductions for non-business travel:
You are allowed to deduct business travel expenses as long as they are strictly for business reasons. For instance, a trip to Spain for a trade show could be deducted from your income whereas a weekend trip to Spain cannot. So mixing pleasure with business is strictly a no-no deduction. Travel to work is a legitimate deduction. HMRC has previously penalised many business owners for claiming false business travel as a deduction. So speak with your accountant to understand better what is and what is not deductible. A small mistake could result in a hefty penalty.
Need help filing a self-assessment tax return? You can seek help from accounting companies in the UK to file correct tax self assessment.
Claiming employees as freelancers:
Many business owners depend on freelancers to complete their targets. These freelancers must be viewed as “freelancers” by the HMRC. One of the most common tax mistakes is referring to employees as freelancers. If you get this thing wrong, your business might end up paying PAYE on top of the amount it’s already paid its workers. Hence, it’s vial to get employee status right.
Workers who use office equipment are deemed as employees by the HMRC. Employees are sometimes required to work on specific projects for a specific time period. This may sound confusing. You must speak to your accountant to clear the difference. They are best to determine who are deemed as employees and who are deemed as freelancers. There are specialised outsourced bookkeeping services providers helping business owners to file taxes correctly.
Conclusion:
Everyone makes mistakes but learning from your mistakes and avoiding them in the future is a true success. To help avoid these tax errors, you might want to take up bookkeeping who also helps with self-assessment tax returns.
